Assessable Income Calculation And Exemptions Under Australian Taxation Law

Gross Pay and Taxable Income Calculation

A: Under the Pay as you go withholding rules nick will have the obligation to collect the payments which is made by his employees so that he can meet the yearend tax liabilities (Miller and Oats 2016). The gross salary received by Nick will be included in the assessable income and tax withheld of pay as you go will be deducted from the gross salary.

Gross Pay	78000
Tax Withheld	19000 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Tax Application	19000
Less: Tax offsets	0
Less: Medicare levy adjustment	0
Net Pay	59000

B: Nick was paid an additional wages for in the form of Christmas bonus of worth $6,000 with net amount of Pay as you go tax being withheld is 4200. Salary and wages or any kind of bonuses that is received entered into the contract cannot be the part of effective salary sacrifice therefore, it is assessable for computation of tax (Lang 2014).

Gross Pay	78000
Add: Christmas Bonus	6000
Total Pay	84000
Tax Withheld	4200
Tax Application	4200
Less: Tax Offsets	0
Less: Medicare levy adjustment	0
Net Pay	79800

C: Whenever an employee is provided with the travel cost an individual may be required to withhold the amount from the payment. The travelling reimbursement received by nick will be included in the assessable income and will be taxed with the salary or wages received by Nick.

Gross Pay	78000
Add:  Reimbursement Expense	1200
Base Income	79200
Tax on taxable income	17287
Medicare Levy	1584
Total tax payable	18871

D: Travel allowance is the payment, which is made to the employee so that he can cover the cost of accommodation occurring over the due course of time (Hayward 2014). When Nick is paid with the travel allowance he may be required to include the allowance amount into his salary and such amount will be taxed as salary and wages withheld.

Gross Pay	78000
Add:  Reimbursement Expense	1200
Add: Travel Allowance	2800
Base Income	82000
Tax on taxable income	19837
Medicare Levy	1640
Total tax payable	21477

E: Nick will be entitled to claim rebate or tax offset on premium reduction depending upon the amount of wages received by him (Cao et al. 2015). The amount of private health insurance rebate, which Nick is entitled to receive, can be reduced and Nick shall calculate the amount of private health insurance rebate, which he is entitled to receive at the time of lodging his tax return.

Gross Salary

78000

Add:  Reimbursement Expense

1200

Add: Travel Allowance

2800

Add: Insurance Premiums

2750

Base Income

84750

Tax on taxable income

20785

Medicare Levy

1695

Total tax payable

22480

F: The superannuation contribution made by Nick will be taxed at the concessional rate of 15% and only the taxable amount will be included in the taxable income (Saad 2014). Nick contribution forms the part of employer contributions and salary sacrifice payment made to his super fund. Hence, the amount of contribution received by Nick will be included into his assessment and it will be allowed as income tax deductions.    

Exemptions and Deductions for Healthcare and Insurance

Gross Salary	78000
Add: Travel Allowance	2800
Add: Insurance Premiums	2750
Add: Insurance Premiums	2750
Base Income	86300
Tax on taxable income	20785
Medicare Levy	1726
Tax on superannuation contribution	1500
Total tax payable	22511

G: Chris is under the obligation to declare the amount, which is received by him for the loss of income or wages under the sickness or accident insurance policy as workers compensation scheme (Woellner et al. 2015). The amount will be included in the assessable income of Chris at the time of lodging tax return. 

H: Chris upon receiving the health insurance of $8000 for his health insurance policy will be exempted income and therefore he shall not be entitled to pay tax. However, it is noteworthy to denote that upon calculating the tax losses of earlier income Chris can deduct and adjust the taxable income of his dependent whenever required.

I: The amount of lump sum received by Chris under the trauma terms of the insurance cannot be included in the assessable income under “section 6-5 or section 102-5 of the Income Tax Assessment Act 1997” (Jones and Rhoades 2013).

J: A payment of unused annual leave entitlement by the employer to the employee shall be considered in the form of assessable income of the employee under “section 83-10 of the ITAA 1997”. Hence, Chris received a cheque of worth 5,400 for his long term service leave which was accrued by him for several years therefore the amount will be included in the assessable income (Barkoczy 2017).  

K: The fees received by Quentin as a medical practitioner will be considered as assessable income in the form of income from profession. Furthermore, the amount received for medical reimbursement by the government will also be taken into the consideration for assessable income (Taylor and Richardson 2013). As laid down under “section 6-5 of the ITAA” that income from ordinary concept should be included for assessment therefore, an amount of $133,000 should be taken into the consideration in the form of assessable income of the medical practitioner ($79000+$54000)= $133000.00

L: The current case study, states that Warren works as “removalist” of truck for earning his income. Therefore, the amount of expenses incurred by him for repairing will be included for deduction from his assessable income. The amount of reimbursement expenses is received by the insurance company must be deducted in order to include the net sum of repairing expenditure. The amount of $14000 will be reimbursed for repairing expenditure and it should not be included in the assessable income. The compensation received represents a loss of income and will be considered for assessment for taxation purpose. The amount of $75,000 which is received for disposal of truck is regarded as gain and therefore it should be included in the assessable income of the tax payer.

Assessable Income for Business and Professional Services

M: The current case represents an armed robbery following which Sandy has received an amount from the insurance company. The sum of $21,000 received for reimbursement is a loss on sale from robberies must be included in the assessable income in the form of reimbursement income. On the other hand, the trading stock is an asset and compensation of $7800 received for loss of trading stock must not be taken into the consideration for assessable income. The amount of shop repair expenses is considered as allowable deductions however on receipt of reimbursement of $3200 it can understood that the repair expenses will not be considered for deductions during the computation of assessable income. Only loss of cash sale from robberies will be included for assessable income.

N: The current case provides that Troy is involved in the business of operating advertising agency and the amount received from rendering advertising services will considered for assessment. It is also found that Troy passed a contra entry in order to adjust the legal expenditure with the income due from solicitor. Receipt of income from advertisement services will be included in the assessable income and the legal expenditure incurred for business purpose will be considered for deductions under “section 8-1 of the Income tax assessment act 1997” (Taylor and Richardson 2013).     

O: Receipt of income from profession should be included for assessment at the time of computing assessable income. The ITAA 1997 further provides that if an individual receives an income on his behalf it should be included in the assessable income. Hence, the amount of $19000 should be included in the assessable income in the form of amount paid to common wealth bank on behalf of Harris.

P: Under the current case study, it is found that Karl received an income upon conducting the business of plumbing (Peiros and Smyth 2017). The income tax act states that considerations received for rendering services can be both in cash and non-cash. It is found that Karl received non-cash considerations of airplane tickets along with accommodation facilities therefore; the amount of $8000 must be taken into consideration for assessing the assessable income.

Q: Rob who is lawyer profession drafted changes in the will of his client. On rendering, such kind of services Rob did not charge any kind of fees however received a pair of cufflinks of worth $250. The law states that amount received from small gifts and rewards are considered as exempted income and no tax is charged (Russell 2016). The amount received by Rob will be included for assessment while computing the assessable income.

Tax Treatment of Gifts and Incentives

R: Any income derived from profession or business should be taken into the considerations at the time of computing the assessable income. Under the current case, it is notice that Petro was involved in the business activity of property development. Hence, on receipt of flyer ticket carrying a value of $3280 will not be considered as assessable income.

S: In the current case, it is found that Len Trader is involved in the activity of carpet retailing. Furthermore, the business received a cash incentive of $36,000 from a supplier for the sale of carpet (Snape and De Souza 2016). The cash incentive, which is sold, is related to the business and hence it should be considered for tax under the heads of business income. Therefore, it can be concluded that an incentive of $36,000 must be taken into the consideration while computing the assessable income.

T: In the current case study it is found that Shelly is involved in the business of coffee shop. It is found that the business had received a coffee machine of $12,000, which is considered as asset, and it should not be included in the computation of assessable income (Russell 2016). Furthermore, it is noticed that the business also received few furniture and umbrella for $8000, which Shelly intends to return, and the receipt of incentive cannot be regarded in the form of business income. Therefore, the sum of $8,000 will not be included in the assessable income.

Reference list: 

Barkoczy, S., 2017. Foundations of Taxation Law 2017. OUP Catalogue.

Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and Wende, S., 2015. Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP, 1.

Evans, C., Minas, J. and Lim, Y., 2015. Taxing personal capital gains in Australia: an alternative way forward.

Hayward, R., 2014. Valuation: principles into practice. Taylor & Francis.

Jones, S. and Rhoades-Catanach, S., 2013. Principles of Taxation for Business and Investment Planning, 2014 edition. McGraw-Hill Higher Education.

Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.

Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in Australia. St Mark’s Review, (235), p.94.

Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.

Peiros, K. and Smyth, C., 2017. Successful succession: Tax treatment of executor’s commission. Taxation in Australia, 51(7), p.394.

Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.

Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice. Routledge.

Russell, T., 2016. Trust beneficiaries and exemptions from CGT: reflections on the Oswal litigation. Taxation in Australia, 51(6), p.296.

Taylor, G. and Richardson, G., 2013. The determinants of thinly capitalized tax avoidance structures: Evidence from Australian firms. Journal of International Accounting, Auditing and Taxation, 22(1), pp.12-25.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2014. Taxation of consolidated groups. In Australian Taxation Law 2014 (pp. 951-996). CCH.